Democratic presidential candidate Hillary Clinton once said that Wall Street did not cause the mortgage crisis that led to the financial collapse, and she also partly blamed poor people who took out mortgages that they could not afford.
Video of Clinton’s December 2007 speech at New York City’s NASDAQ stock market could provide fuel both for her left-wing opponent Bernie Sanders and also for Republicans.
Clinton was running for president as it was becoming clear that subprime mortgages were failing as the first part of what became known as the financial collapse. Clinton referred in the speech to her “wonderful donors, some of whom are here today,” and then absolved those donors of culpability in the collapse.
In her remarks, she spoke of “an economy that in recent months has been the subject of increasingly worrisome headlines about weakening consumer confidence, about a declining dollar, and ballooning national debt.”
“Now these economic problems are certainly not all Wall Street’s fault. Not by a long shot,” Clinton said (4:45 Mark In Video Below).
“Wall Street may not have created the foreclosure crisis but Wall Street certainly had a hand in making it worse,” Clinton eventually conceded.
Though Clinton said that Wall Street has played a “significant role in the current problems” including the housing crisis, she went on to partially blame homeowners for their own role in the financial meltdown.
“Now who’s exactly to blame for the housing crisis? Well, that’s always a question that the press and people ask, and I think there’s plenty of blame to go around,” Clinton said, pointing blame at mortgage lenders, the Bush administraton, and rating agencies.
Then she blamed poor people who took out mortgages they couldn’t afford to pay back.
“And certainly borrowers share responsibility as well. Home buyers who paid extra fees to avoid documenting their income should have known they were getting in over their heads,” Clinton said. (11:55 Mark In Video).
Clinton also blamed speculators who took out multiple mortgages.
“Speculators who were busy buying two, three, four houses to sell for a quick buck don’t deserve our sympathy.”
Ironically, Clinton praised the trend toward low-income home ownership that caused the collapse. That trend started, in large part, due to her own husband’s government lending policies.
“Good things have happened in the housing market. Home ownership is at the heart of the American Dream, and ownership rates rose to a record 69 percent in 2006. That means millions of new stakeholders in their communities. The largest gains were among low income and minority families,” Clinton said.
Of course, it was President Bill Clinton’s Housing and Urban Development (HUD) agency under Secretary Andrew Cuomo that forced lenders into the subprime lending business.
Joseph Lawler described in The American Spectator how a 1992 federal government mandate – which was increased by Cuomo – forced government-sponsored enterprises Fannie Mae and Freddie Mac to start giving out tons of subprime loans to poor minorities who could not afford to pay them back.
“The mandate meant that, in 1999, 42 percent of Fannie and its counterpart Freddie Mac’s loan purchases serviced low- and moderate-income families,” Lawler wrote.
Bill Clinton’s director of the Department of Housing and Urban Development raised the requirement to 50 percent, funneling even more loans to people who could hardly afford them. That director was Andrew Cuomo, now the governor of New York and rising Democratic Party star. Cuomo had great visions for HUD’s housing goals, predicting that “it will strengthen our economy and create jobs.” In order to meet the goals set by Cuomo, Fannie and Freddie had to buy riskier and riskier loans, including subprime. Morgenson and Rosner report that GSE purchases of subprime began increasing sharply in 1999, and in 2008 Fannie and Freddie purchased $1.6 trillion of toxic mortgages, almost half of the entire market.
Financial expert Peter Wallison, who was warning of the housing bubble years before the collapse, described how these government mandates led America to disaster.
“Because Fannie and Freddie were the dominant players in the mortgage markets, when they reduced their underwriting standards, so did most lenders. Homebuyers, of course, were happy to put up low downpayments, even if they could afford much more, and soon many of the concessionary benefits that were intended to go to low income borrowers were going to people who could have afforded prime mortgages,” Wallison said.
“By 2008, before the financial crisis, there were 55 million mortgages in the U.S. Of these, 31 million were subprime or otherwise risky,” Wallison said.
And of this 31 million, 76 percent were on the books of government agencies, primarily Fannie and Freddie. This shows where the demand for these mortgages actually came from, and it wasn’t the private sector. When the great housing bubble (also created by the government policies) began to deflate in 2007 and 2008, these weak mortgages defaulted in unprecedented numbers, causing the insolvency of Fannie and Freddie, the weakening of banks and other financial institutions, and ultimately the financial crisis.
The Clinton campaign did not return a request for comment for this report.